Retirement Cost of Living Adjustments (COLA)
The retired pay computed under each retired pay plan is adjusted each year, effective December 1st, by the change in consumer prices. The COLA is determined by the percentage increase, if any, between the average 3rd quarter Consumer Price Index (CPI) of the current year over the average 3rd quarter (CPI) of the prior year. In the event of a decrease in the CPI, the COLA will not be negative, but will be zero. Additionally, the COLA for the next year will reach back to the 3rd quarter CPI to the last year in which there was a positive COLA increase.
If the percent determined above is greater than 1 percent, the COLA for REDUX retirements will be reduced by 1 percent. If the percent determined above is 1 percent or less, the COLA for the REDUX retirement plan will be the same as for all other retirement plans.
The first COLA adjustment after retirement is calculated under a formula different than that above, if the member retires between January 1st and September 31st. This is to preclude the advantage of receiving a retirement based on both a new pay raise and full COLA in the first year of retirement. The amount of this first "partial COLA" is calculated differently for the Final Pay and High-36 retirement plans. The partial COLA for REDUX plan retirees is based on the High-36, with a further prorated deduction. The first partial COLA under the Disability retirement plan is the same as for the Final Pay retirement plan.
Note that the COLA for retired pay is calculated differently than the increase to active duty pay. Thus, retirement pay COLAs and annual active duty pay raises will differ al active duty pay raises will differ